If you've been keeping an eye on bankruptcy filings in New Jersey lately, you already know the numbers have been climbing. What's gotten a lot less attention is a quieter development moving through Washington that could reshape who actually qualifies to use two of the most important tools in the Bankruptcy Code: Chapter 13 for individuals and families, and Subchapter V of Chapter 11 for small businesses. On September 16, 2026, the U.S. House of Representatives passed the Bankruptcy Threshold Adjustment Act of 2026, a bill that would permanently raise the debt ceilings that determine eligibility for both. The Senate passed its own version earlier in the summer. Neither chamber has sent a final, reconciled bill to the President's desk yet, but the momentum is real, and it's worth understanding what's actually on the table, especially if you're a small business owner or a homeowner in New Jersey weighing your options.
In NJ this is a game changer for our clients. We have been having a lot of trouble with clients that are over the Chapter 13 debt limits and we are forced to file a Chapter 11. Many times, Chapter 11 is not the best option for our clients and a chapter 13 is much better suited to help them. Furthermore, some of our business clients can now file Subchapter V instead of a Chapter 11. This also has tremendous benefits.
Debt limits sound like a technical detail, but they function as a gate. If your business's or your household's debt sits above the current ceiling, certain chapters of bankruptcy simply aren't available to you, no matter how much sense they'd otherwise make for your situation.
Where the Debt Limits Stand Right Now
Two separate ceilings matter here, and both were recently adjusted for inflation:
Subchapter V (Small Business Reorganization)
Subchapter V was created in 2019 to give small businesses a faster, cheaper alternative to a traditional Chapter 11 reorganization. There's generally no separate creditors' committee, no separate disclosure statement, and the business's owners typically keep running things while a repayment plan gets confirmed. During the pandemic, Congress temporarily raised the debt ceiling for Subchapter V eligibility to $7.5 million so more struggling businesses could use it. That temporary expansion expired on June 21, 2024. Once it lapsed, Subchapter V eligibility reverted to the Bankruptcy Code's general "small business debtor" definition, which is periodically adjusted for inflation. As of the most recent adjustment, effective April 1, 2025, that figure sits at $3,424,000 in combined secured and unsecured debt.
Chapter 13 (Wage Earner's Plans)
Chapter 13 is the chapter most individuals and married couples use to catch up on a mortgage, keep a car, or restructure debt over a three-to-five-year repayment plan instead of liquidating assets. Eligibility has always depended on staying under separate secured and unsecured debt ceilings, and those figures were also adjusted effective April 1, 2025: $526,700 for unsecured debt and $1,580,125 for secured debt, according to the Administrative Office of the U.S. Courts' Federal Register notice. If either category runs over its limit, even a debtor who would otherwise be a good candidate for Chapter 13 gets pushed toward Chapter 11 instead, which is slower and considerably more expensive.
What the Bankruptcy Threshold Adjustment Act Would Change
The bill working its way through Congress would do two things. First, it would permanently set the Subchapter V debt ceiling at $7.5 million, with no expiration date, so businesses would no longer be at the mercy of a temporary provision lapsing again the way it did in 2024. Second, it would combine the two separate Chapter 13 ceilings into a single debt limit of $2.75 million, applying to secured and unsecured debt together rather than as two independent caps.
For a New Jersey homeowner, that second change matters more than it might sound. North Jersey's real estate values mean it's not unusual for a household's mortgage balance alone to approach or exceed the current secured debt ceiling, especially once a first and second mortgage are combined. Under today's split-limit structure, a family that's otherwise a strong candidate for a Chapter 13 repayment plan can be disqualified purely because their mortgage debt trips the secured ceiling, even if their total debt load would fit comfortably under a single combined threshold.
Where the Bill Actually Stands, and Why That Matters
Here's the important caveat: this is not yet law. The Senate passed its version, S. 3977, by unanimous consent in early August 2026. The House passed its own version, H.R. 7730, by voice vote on September 16, 2026. Before anything changes, the two chambers need to agree on identical text, and the President needs to sign it. As Senators Chris Coons, Chuck Grassley, and Dick Durbin noted in a joint statement after the Senate vote, sponsors on both sides of the aisle have pushed for swift final passage, but there is no enacted law yet and no guaranteed timeline for one.
There's also a detail that matters if you're currently weighing whether to file: even once this bill is signed, it's expected to apply only to cases filed after its effective date, not retroactively to pending or already-closed cases. If you're eligible to file under today's limits and you're ready to move forward, waiting on the chance that Congress finalizes a more generous ceiling doesn't help you. It just means more months of collection calls, accruing interest, or worse, in the meantime.
Why New Jersey Small Business Owners Should Be Paying Attention
New Jersey's economy runs on small and mid-sized businesses: contractors, medical and dental practices, restaurants, auto shops, and family-owned distributors, many of which carry equipment loans, commercial leases, and lines of credit that add up quickly. A business that's a few hundred thousand dollars over the current $3,424,000 Subchapter V ceiling today doesn't get the option of a streamlined reorganization; it gets shunted into a standard Chapter 11 case, with the added cost, longer timeline, and creditors' committee that come with it. Raising the ceiling to $7.5 million, permanently, would open Subchapter V to a meaningfully larger slice of New Jersey's small business community, which is exactly the audience the tool was designed for in the first place.
Why This Matters Alongside New Jersey's Rising Filing Numbers
We've written before about how bankruptcy filings have been climbing across New Jersey, and Chapter 13 makes up a substantial share of those cases. In the twelve months ending February 2026, Chapter 13 accounted for nearly 6,000 of the roughly 16,400 bankruptcy cases filed across the District of New Jersey's three divisions in Newark, Trenton, and Camden, according to the U.S. Bankruptcy Court's own published statistics. Any change to who qualifies for that chapter has real, practical consequences for a lot of New Jersey households, not just an abstract policy debate in Washington.
What You Should Do Right Now
If you're a New Jersey business owner or a homeowner considering bankruptcy, don't put your decision on hold waiting for Congress. The current debt ceilings already apply to any case filed today, and they already provide meaningful relief for the overwhelming majority of people and businesses who need it. An attorney can review your specific debt structure, secured and unsecured, business and personal, and tell you plainly which chapter fits your situation under the rules as they exist right now, while also keeping an eye on whether the pending legislation opens up additional options down the road.
Please call one of our NJ bankruptcy attorneys to go over how the expansion of the debt limits can help you in your current financial situation. We offer a free phone consultation.
Frequently Asked Questions
- Q: What is Subchapter V of Chapter 11 bankruptcy?
- It's a streamlined path within Chapter 11 created for small businesses in 2019. It generally skips the separate creditors' committee and disclosure statement required in a standard Chapter 11 case, and it lets a business's owners keep more control while a repayment plan is worked out, provided the business's debt falls under the eligibility ceiling.
- Q: What is the current Subchapter V debt limit?
- As of the April 1, 2025 inflation adjustment, a business generally needs combined secured and unsecured debt under $3,424,000 to qualify, following the expiration of a temporary $7.5 million pandemic-era ceiling on June 21, 2024.
- Q: What are the current Chapter 13 debt limits that apply in New Jersey?
- The same nationwide limits set under the Bankruptcy Code apply in New Jersey: $526,700 in unsecured debt and $1,580,125 in secured debt, effective April 1, 2025. New Jersey does not set its own separate figures for these ceilings.
- Q: Has the Bankruptcy Threshold Adjustment Act become law?
- Not yet. The Senate and House have each passed their own versions of the bill, but as of this writing the two chambers have not reconciled a single, identical version, and the President has not signed anything into law.
- Q: If the law passes, will it apply to bankruptcy cases already filed?
- Based on how the legislation is currently written, no. The new limits are expected to apply only to cases filed after the law takes effect, not to pending or already-closed cases.
- Q: Should I wait to file for bankruptcy until this bill passes?
- Generally, no. There's no set timeline for final passage, and today's debt limits already allow the great majority of individuals and small businesses to file. Waiting only delays relief and lets collection activity, interest, and stress continue in the meantime.
